2003 May 16
AEON Stores (Hong Kong)

JUSCO ANNOUNCES 2002/ 2003 ANNUAL RESULTS TURNOVER RISES 6.5% TO HK$3,961 MILLION PROFIT ATTRIBUTABLE TO SHAREHOLDERS REACHES HK$57 MILLION

FURTHER CONSOLIDATES FOOTHOLD IN SOUTH CHINA MARKET

(HONG KONG, 16 May 2003) - General Merchandise Stores (GMS) operator JUSCO Stores (Hong Kong) Co., Limited (Stock code: 984) and its subsidiaries ("JUSCO" or the "Group") today announced the audited consolidated results for the year ended 28 February 2003.

Turnover increased 6.5% to HK$3,961 million. Profit from operations was recorded at HK$83 million while profit attributable to shareholders reached HK$57 million. During the year, three new GMS were opened in the PRC. Profit was lower than last year because of the rise in pre-operational expenses incurred for the new stores, amounting to HK$14 million, and an income tax expenses of HK$30 million. Earnings per share were 21.88 HK cents. (2002: 29.60 HK cents)

The Board of Directors has recommended a final dividend of 9.0 HK cents (2002: 9.5 HK cents) per share. No interim dividend was declared during the year (2002: 2.0 HK cents).

Mr. Kazumasa Ishii, Managing Director of JUSCO, said, "Despite the difficult environment last year, we are pleased that JUSCO managed to maintain stable performance and continued to consolidate our foothold in the south China region. This was attributable to our proven business strategies such as successful corporate and product branding policies, expansion in the niche $10 shop market, launch of attractive promotional campaigns as well as aggressive promotion of J CARD and AEON JUSCO affiliated credit cards. The Group has also maintained a very strong and solid financial foundation with no bank borrowings and cash on hand of over HK$400 million at the year-end date. This healthy financial position provides us with strong back-up to capture the opportunities ahead."

During the review year, the Group was able to maintain a similar level of gross profit margins at 27.2% (2002: 28.2%). Staff costs against turnover slightly decreased from 9.7% to 9.6% while rental costs against turnover recorded a small increase from 8.9% to 9.2%. Interest expenses further reduced from last year's HK$125,000 to an insignificant amount this year while interest income was recorded at HK$4.3 million. Capital expenditure in the year amounted to HK$100 million, which was mainly incurred for the opening of the Dongguan, Shenzhen and Zhuhai Stores in the PRC.

The economic backdrop of Hong Kong in 2002 remained a subdued growth scenario. This undoubtedly created a very tough retail operating environment as consumer confidence was severely depressed.

Mr. Ishii commented, "In spite of the adverse circumstances, JUSCO was able to maintain stable performance, with sales of our Hong Kong stores rising 1.5% to HK$3,224 million. Profit from operations grew 1.1% to HK$80 million. To enhance our corporate branding, JUSCO has been committed to providing customers with merchandise and a shopping environment which guarantee "safety", "confidence" and "trust". Though large-scale renovation was not carried out last year, we regularly conducted betterments of store layout and improved merchandise display methods, which attracted high flows of customers."

Mr. Ishii continued, "As for product branding, we continued our dedication to providing customers with rich merchandise mix at reasonable prices. Over 600 items under our famous in-house brand, "Top Valu", covering a great variety of products were carried at our GMS. Not only were these items well received but they also strengthened JUSCO's product differentiation from our competitors."

Last year also saw the breakthrough development of JUSCO's "$10 Plazas" as its flagship shop was opened outside the GMS in Causeway Bay, which has been attracting heavy customer flows and recording satisfactory sales.

During the year, JUSCO also launched a series of "Theme Marketing Campaigns" and the "15th Anniversary" Lucky Draw. These promotions succeeded in increasing customer flows and boosting sales. The Group also relentlessly sought to enlarge its loyal customer base through actively expanding J CARD and AEON JUSCO affiliated credit card membership.

China's role in the global market will continue to ascend as it has already entered the WTO. With a spectacular GDP growth and the people's continuously rising living standard, the PRC undoubtedly represents a market with extensive opportunities. In view of this, JUSCO has continued its footsteps to expand in this surging market in the past year.

Mr. Ishii continued, "The PRC stores recorded a surge in turnover of 35.6% to HK$737 million. Three new GMS in Dongguan, Shenzhen and Zhuhai were opened last year. Because of this, we had to incur an increase in pre-operating expenses . As these stores were still in the initial investment stages, profit from operations for the PRC stores was lower than the previous year. However, we believe that the opening of these GMS allowed the Group to develop chain-store operation, which will give us economies of scale in logistics and merchandise sourcing. But more importantly, this will further strengthen JUSCO's position in the PRC retail market, which presented us a strong driver for future growth."

Looking to future, Mr. Ishii said, "In Hong Kong, consumption sentiment was dampened by the downgrading economic environment, which was aggravated by the recent outbreak of SARS. Despite this, JUSCO has been treating it as a normal situation and devising suitable strategies to further consolidate our market position. These include giving paramount concern for the maintenance of hygiene and quality control, conducting extensive market research to devise attractive promotional campaigns, source merchandise which suit our customer needs as well as actively promoting J CARD and JUSCO AEON affiliated credit cards to enlarge our loyal customer base. The present economic conditions also present us with the opportunity to further pursue our strategy of setting up "$10 Plazas" at densely populated locations along major mass transportation networks."

Mr. Ishii concluded, "Apart from Hong Kong, the spread of the rampant atypical pneumonia also affected most of the south China region, which undoubtedly deterred consumption sentiment. In view of this, a prudent approach will be adopted to regularly monitor and review our expansion tempo in the region. But in the long run, we are still very optimistic about the booming economic growth of China. We consider the opening of GMS in the southern PRC to be a long-term investment and understand that there is an adjustment period during the initial investment stage with a break-even point at around 12 months. In future, we will regularly change our store layout, merchandise mix, and product assortment presentation so as to better suit the changing tastes and real needs of local customers."

In 2003 and 2004, JUSCO will open two new GMS at Zhongshan and Foshan respectively. The Group's further strengthening of foothold in the south China region backed by its strong financial position and proven business strategies will prepare it for future development.

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About AEON Stores
AEON Stores was established in Hong Kong in 1985 and listed on the Hong Kong Stock Exchange in 1994. The Group is mainly engaged in the operation of general merchandise stores (GMS). Currently, it operates 10 GMS, 2 independent supermarkets, 33 independent Living PLAZA by AEON, 30 independent Daiso Japan, 1 independent Bento Express by AEON and 4 Mono Mono and 3 KOMEDA'S Coffee in densely populated districts in Hong Kong. It also operates 21 GMS and 15 independent supermarkets in Guangdong Province, the PRC.

For more information：
AEON Stores (Hong Kong) Co., Limited
Corporate Communication Department
Tel.：（852）2165 0777
Email：aeonpr@aeonstores.com.hk